U.S. oil explorers idled rigs for a second straight week as Goldman Sachs said the oil glut could push prices as low as $20 a barrel.
Rigs targeting oil in the U.S. fell by 10 to 652, Baker Hughes said Friday. Explorers had cut 13 last week.
Natural gas rigs were trimmed by six to 196, bringing the U.S. total down by 16 to 848.
The oil market remains more oversupplied than previously expected, with a surplus forecast to persist into 2016, Damien Courvalin and other Goldman analysts wrote in a report Friday. The glut could lead crude prices to plunge further before the market can re-balance.
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“A lot of companies are in a wait-and-see mode, saying, ‘Let’s see if this $20 talk happens,’” said Carl Larry, head of oil and gas at Frost & Sullivan. “Instead of investing and bringing on new rigs, they’re saying, ‘Let’s see where it goes from here.’”
Production this year is still projected to be the highest since 1972, a federal report showed.
Drillers reduced the number of rigs seeking crude by one in each of the three biggest shale oil regions in the U.S. — the Permian Basin, the Eagle Ford and the Bakken.
Rig counts could fall further if oil prices remain at current levels, according to Bloomberg Intelligence.
“Well economics fail to justify the deployment of fresh drilling capital, even after factoring in 30 percent declines in well costs and efficiency gains,” Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, wrote in a report Tuesday.
Natural gas rigs fell to the lowest level in Baker Hughes records dating to 1987, led by a two-rig drop in the Eagle Ford in South Texas. This week, the Energy Information Administration raised its forecast of gas production for the year to 78.95 billion cubic feet a day, which would be a record.
America’s oil drillers have sidelined more than half the country’s rigs since October as the world’s largest suppliers battle for market share. The crude being pumped out of U.S. shale formations helped create a global glut that’s pushed prices down almost 60 percent since June 2014.
In its monthly Short-Term Energy Outlook on Wednesday, the Energy Information Administration reduced its forecasts for U.S. crude output in 2015 and 2016, predicting a slide to 8.82 million barrels a day next year from 9.22 million a day in 2015.
Production this year is still projected to be the highest since 1972, the report showed. And a separate government report showed crude that supplies rose 2.57 million barrels to 458 million, leaving stockpiles more than 100 million barrels above the five-year seasonal average.